A Nicholas Carr article on the changing face of video-watching, as America moves towards streaming video to dumb terminals and more on-demand television watching, reminds me of how Canada’s moving at its own pace in this realm. What with the battle between Canadian broadcasters like CTV and CBC and Canadian network companies like Rogers and Shaw, arguing over carriage fees in the realm of old-school cable television, it feels like we’re really behind the curve here. I mean, in the article, Comcast is thinking of buying NBC Universal. The closest thing we have here is Rogers owning… CHUM Television (CityTV stations etc)? The Canadian Television Fund or whatever it is?
Obviously, we don’t have a real equivalent to Netflix in Canada — there have been attempts, but they’ve done relatively poorly — and very few of our content companies have looked to digital distribution, except maybe CBC, although there isn’t a full supply-chain in existence. So what remains is the ad-hoc version of downloading unofficial content and streaming it via modded Xbox. I mean, has Xbox Live or iTunes really taken off here, for distribution of Canadian television/content? I don’t know. I imagine this will make us even more America-centric; I can’t think of the last mainstream Canadian television show I’ve watched, save for the occasional cursory glance when I’m heading for the local news (one of the few areas that cable/network television still has going for it — I wonder if there will ever be a way to mimic this serendipitous kind of news-watching in a streaming or on-demand format).
This also reminds me a lot of the differences between American telecommunication companies and Canadian ones, in terms of take-up of new technology. Are we running behind in this country? Or will this kind of slow cultural uptake be our saviour in the end? (Much like the difference between American and Canadian banking cultures.)
A veteran energy trader speaks about the issues in the natural gas market. Pretty interesting to me, as there’s been a lot of chatter about natural gas and its lows and this article makes me kind of leery of trying to profit in it.
It’s pretty interesting seeing all these documentaries and books lately on futures exchanges; here’s a sort-of-review of a book by Leo Melamed, the guy who took the Merc from a pit trader’s paradise to the decentralized, electronic market it mostly is today. It’s still fascinating to me how we’ve gone from agricultural trading and hedging production to a collection of virtual markets represented by numbers, paralleling the move from hard assets and paper currencies to banking and accounts that are often just about manipulation of figures.
It fascinates me a little how many people in trading or investing set goals for themselves, often monetary targets that are aimed for on a specific timeline. It’s mostly because this is so at odds with my own view of trading and the markets; at least on a broader scale, I don’t have any specific number in mind when I trade, and have found the more that I do look to specific numbers, the worse my results tend to be. I think it was in Market Wizards that someone told an anecdote about how one trader was aiming to buy a fur coat for his wife with the profits from some trade that he hadn’t yet closed, and how in the end, he lost the profits he did have and then some. It reminds me a little of this quotation from Thomas Merton’s selected translations from the writings of Zhuang Zi, The Way of Chuang Tzu, which happens to be one of my favourite books:
The Need to Win
When an archer is shooting for nothing
He has all his skill.
If he shoots for a brass buckle
He is already nervous.
If he shoots for a prize of gold
He goes blind
Or sees two targets–
He is out of his mind!His skill has not changed. But the prize
Divides him. He cares.
He thinks more of winning
Than of shooting–
And the need to win
Drains him of power.[xix. 4]
I’ve been re-reading my older posts from 2007-2008 and came across this excerpt which bears repeating. (I could probably even re-use the entry title!) There really is nothing new under the sun.
In its infinite generosity, Washington came to the rescue. Of course it had no choice; no modern government would dare let a financial crisis turn into a general collapse. Yet the situation is rich with irony. In the early 1990s, Greenspan would craft the Federal Reserve’s bailout of the 1980s mania. And the braindead caretaker administration of George Bush crafted the greatest socialization of private loss in history, the S&L bailout. And, remarkably, almost nobody has suffered serious criminal penalties or political disgrace for this rampant abuse of trust. Huge quantities of public money — some $200 billion, though definitive accountings are hard to come by — were spent with little discussion or analysis, and the affair is now largely forgotten. The chance to use the industry’s partial liquidation as an opportunity to develop new public and cooperative financial institutions was blown. Within a couple of years of the crisis’ passing, no one paid it any mind any longer. It’s as if it never happened.
Interesting excerpt within a Bloomberg article on the real estate plunge in the US:
While prospects are grim in some areas, it wouldn’t be the first time prices made a comeback. The median U.S. home value tumbled 39 percent during the 1930s to $2,938 from $4,778 at the start of a decade dominated by the Great Depression, according to the Census Bureau.
Within 10 years the loss was erased, as servicemen back from World War II began buying houses financed with G.I. Bill benefits. The median home value increased to $7,354 by 1950, an average gain of 6.2 percent each year during the 1940s.
In the 1950s, home values surged an average of 15 percent a year, according to the Census. In the 1960s, the pace dropped to 4.3 percent before jumping to 18 percent a year in the 1970s, boosted by a U.S. inflation rate that reached 13 percent. In the 1980s, the average annual increase was 6.8 percent. The pace dropped to 5.1 percent during the 1990s.
Interesting to note how inconstant house price rises are, as well as the fact that home values just barely seem to outpace inflation. I’m reminded of a book I read — it might have been Robert Shiller’s Irrational Exuberance — where they pointed out that housing was rarely looked upon as an investment to be bought and sold like stocks until relatively recently, and it seems like it might be borne out by the fact that generally prices have tracked inflation, except relatively recently.
I don’t know enough about how housing was viewed during the Roaring Twenties, but given the 39% drop in value during the Depression, I’m wondering if housing had started to become looked upon as an investment back then, too?
After watching the quasi-illicit documentary Trader on Paul Tudor Jones (I feel like I’ve been talking about him non-stop lately on this blog), I did some more reading online and found a link to this interesting speech he gave to a high school class. An interesting follow-up is contained in the speech to something just hinted at in the documentary, where we see Tudor Jones at the beginning of his charitable work with inner-city students:
In 1986, I adopted a class of Bedford Stuyvesant 6th graders and promised them if they graduated from high school, I would pay for their college. For those of you who don’t know, Bed-Stuy is one of New York City’s toughest neighborhoods. Even the rats are scared to go there at night. Statistically about 8% of the class I adopted would graduate from high school, so my intervention was designed to get them all into college. For the next six years, I did everything I could for them. I spent about $5,000 annually per student taking them on ski trips, taking them to Africa, taking them to my home in Virginia on the weekends, having report card night, hiring a counselor to help coordinate afternoon activities and doing my heartfelt best to get them ready for college.
Six years later, a researcher from Harvard contacted me and asked if he could study my kids as part of an overall assessment of what then was called the “I Have a Dream” Program. I said sure. He came back to me a few months later and shared some really disturbing statistics. 86 kids that I had poured my heart and soul into for six years were statistically no different than kids from a nearby school that did not have the services our afterschool program provided. There was no difference in graduation rates, dropout rates, academic scores, teenage pregnancies, and the list went on. The only thing that we managed to do was get three times as many of our kids into college because we were offering scholarships whereas the other schools were not. But in terms of preparing these kids for college, we completely and totally failed. Boy, did this open my eyes. That was the first real-time example for me of how intellectual capital will always trump financial capital. In other words, I had the money to help these kids, but it was useless because I didn’t have the brains to help them. I had tried to succeed with sheer force of will and energy and financial resources. I learned that this was not enough. What I needed were better defined goals, better metrics, and most importantly, more efficient technologies that would enable me to achieve those goals.
What that whole experience taught me was that starting with kids at age 12 was 12 years too late. An afterschool program was actually putting a band-aid on a much deeper structural issue, and that was that our public education system was failing us. So in 2000, along with the greatest educator I knew, a young man named Norman Atkins, we started the Excellence Charter School in Bedford Stuyvesant for boys. We set the explicit goal of hiring the best teachers with the greatest set of skills to be the top performing school in the city. Now that was an ambitious goal but last year in 2008, Excellence ranked #1 out of 543 public schools in New York City for reading and math proficiency for any third and fourth grade cohort, and our school was 98% African American boys. We never would have done that had I not failed almost 15 years earlier.
The first part of Accrued Interest’s latest post strikes me as one of the few convincing statements about the use of technical indicators/charting that I’ve seen stated online. First and foremost, it’s a way to gauge the psychology of markets, which is something that can’t be done using fundamental factors. Whether it’s that effective is a good question, and whether the widespread use of charts and technical indicators is itself a cause of negative or positive feedback is another interesting line of inquiry. I agree with his view that it tends to get taken really far, often by people who put too much faith in these methods and metrics. It’s interesting to see how the more short-term a person tends to trade, the more that these technical factors seem to make sense; it’s clearly tied to the fact that psychology of market participants becomes more and more important in shorter time frames, and that in the long run, fundamental factors tend to win out after everyone’s calmed down and is seeing with clear vision. Warren Buffet never reads charts, Paul Tudor Jones claimed that he used technical factors in his decision-making about half the time, and the average daytrader probably doesn’t even place a trade without having MACD, RSI, Bollinger Bands, stochastic indicators, Fibonacci whatsits and reverse multiplier Kruchinski-Myer alpha-theta wave regressions overlayed on their chart.
An upcoming new flick about the pit traders on the floors of the Chicago exchanges and their accelerating road to extinction. (With an appearance by good ol’ Rick Santelli of “Boston Tea Party” rant fame.) Not really my style of trading, but an interesting and relatively unexplored world for the mainstream world. About the only major, prior depictions I can think of off-hand are in Trading Places and Rogue Trader, about the Nick Leeson/Barings Bank fraud.
On a side note, I’ve become convinced that 90% of trading is psychology, and knowing your own behaviour and personality and how to exploit its strengths and mitigate its weaknesses. The 10% of tactics and strategy is also very important, but will always be subordinated to psychology, which can make any tactic or strategy useless, usually at exactly the wrong time. For people interested in getting into trading, I’d take a look at your behaviour in other situations first, and less at whether you’re “smart” or intelligent in other realms. I think this is why the Turtle Traders were fairly effective, as the actual tactics involved were simple; they filtered for attitude and personality. (Egolessness also helps, at least in the long run.)
Fascinating investigation of the many ways in which the United States has encouraged bad or looser lending for the vaunted “American Dream” of homeownership.
We’ve largely forgotten that Herbert Hoover, as secretary of commerce, initiated the first major Washington campaign to boost homeownership. His motivation was the 1920 census, which had revealed a small dip in ownership rates since 1910—from 45.9 percent to 45.6 percent of all households. The downturn was likely the result of a temporary diversion of resources away from housing during World War I. For Hoover, though, the apocalypse seemed nigh. “Nothing is worse than increased tenancy and landlordism,” he warned—though surely many things were worse. With little justification, he predicted that in just a few decades, three-quarters of all Americans would be renters. The press echoed the urgency. “The nation’s stability [is] being undermined,” the New York Times editorialized. “The masses [are] losing their struggle for a better life.”
…
Congress passed a bill in 1975 requiring banks to provide the government with information on their lending activities in poor urban areas. Two years later, it passed the Community Reinvestment Act (CRA), which gave regulators the power to deny banks the right to expand if they didn’t lend sufficiently in those neighborhoods. In 1979, the Federal Deposit Insurance Corporation (FDIC) rocked the banking industry when it used the CRA to turn down an application by the Greater New York Savings Bank to open a branch on the Upper East Side of Manhattan. The government contended that the bank didn’t lend enough in Brooklyn, its home market.
Bankers recognized that a fundamental shift in regulation was taking place. Previously, the government had simply made sure that banks’ practices were safe and that depositors’ funds were protected. Now, it would use its power over banks to shape their lending strategies. Soon after the Greater New York ruling, for instance, the Federal Home Loan Bank Board told a Toledo, Ohio, bank that it had to eliminate its practice of lending only to its current customers during times when funds were tight; the maneuver might be discriminatory. The FHLBB also cast a dubious eye on other bank actions to tighten credit in a downturn, such as raising the minimum down payment on mortgages.
Seems like Look Communications has finally sold off their coveted wireless spectrum to Inukshuk. I previously wrote about that here.
Businessweek takes a look at the results of some of the MBA student-run investment funds.
This year the learning curve is steeper than most. Two days after the SMF class’s first purchases, the Dow Jones industrial average tumbled 800 points and finished the day below 10,000 for the first time since 2004. The class’s meticulous mathematical modeling and historical analysis suddenly meant nothing as the MBAs saw stocks they thought were safe bets—Johnson & Johnson (JNJ), Procter & Gamble (PG), Exxon Mobil (XOM), and IBM (IBM)—crash and burn.
It still fascinates me that speculating and investing, something that used to be a lot wilder and woolier — think in the days of the railroad barons and the pre-crash Twenties — has gotten so far from its roots in the halls of the university. All this math and statistical modelling and we’re still suffering the same fates, if not worse; at least in olden times workers stuck to their work and socked their money away. Often now, it’s at the mercy of those who take a much keener interest in money and markets.
David Olive weighs in on the Chrysler bankruptcy filing. I have to say, he makes complete sense to me — a Fiat-Chrysler tie-up doesn’t seem like it would suddenly resolve either company’s issues, and Chrysler’s been bouncing around different owners for years without any real success. They’re going to have to choose a really imaginative person or group of people to turn things around, if it’s really possible.
Interesting strategies for fast food businesses in these recessionary times. I can’t imagine, like Andrew Puzder (the CEO of CKE Restaurants quoted in the article), what kind of crap this food must be like, for them to be willing to use them as loss-leaders. I’ve never been much of a fast food eater, so this doesn’t really make me want to go out and try it; there was a big push by McDonald’s here where they were giving away their free, new, premium roast coffee and I had zero interest in trying it. Personally, I’m all for a fast food tax that gets used to subsidize healthier, less manufactured food; this race-to-the-bottom kind of business always sucks.
On a related note to the last post, in this New York Times Magazine interview with Obama on finance and the current economic issues, he says:
THE PRESIDENT: I want to emphasize, though, that part of the challenge is making sure that folks are getting in high school what they need as well. You know, I use my grandmother as an example for a lot of things, but I think this is telling. My grandmother never got a college degree. She went to high school. Unlike my grandfather, she didn’t benefit from the G.I. Bill, even though she worked on a bomber assembly line. She went to work as a secretary. But she was able to become a vice president at a bank partly because her high-school education was rigorous enough that she could communicate and analyze information in a way that, frankly, a bunch of college kids in many parts of the country can’t. She could write —
David Leonhardt: Today, you mean?
THE PRESIDENT: Today. She could write a better letter than many of my — I won’t say “many,” but a number of my former students at the University of Chicago Law School. So part of the function of a high-school degree or a community-college degree is credentialing, right? It allows employers in a quick way to sort through who’s got the skills and who doesn’t. But part of the problem that we’ve got right now is that what it means to have graduated from high school, what it means to have graduated from a two-year college or a four-year college is not always as clear as it was several years ago.
